What is an Offshore Merchant Account?

A Beginner’s Guide to Offshore Merchant Accounts

Is your business based in a non-resident country? Does your business deal with a large amount of transactions, is in the grey area, or in an industry with high chargeback rates? If your answer to these questions is yes, then you have probably experienced the rough patch of acquiring merchant accounts. But worry not because your problem is not an isolated case. This is a common issue for many businesses that need high risk payment processing services.

You have found just the right guide that will help you understand offshore merchant accounts for high risk businesses and they’re important. Know its definition, why you need it, and how you can get your own high-risk offshore merchant account.

Definition of Offshore Merchant Account
Offshore merchant accounts and international merchant accounts both mean the same thing. That said, both terms can be used interchangeably by banks and other financial institutions. An offshore merchant account, in basic definition, is a merchant account provided by banks to businesses based on a different country as the bank. It’s highly similar to your traditional merchant account and functions the same way. However, depending on your underwriter, you may get the following features:

Extra Layer of Anti-Fraud Protection – high-risk accounts are branded as such because of the commonality of fraudulent transactions in these businesses. For this reason, most account providers have imposed an expanded anti-fraud security protection program for international merchant accounts. This improved security is placed in hopes to improve detection of potential fraud and other suspicious transactions.

Multi-Currency Transactions – given that transactions come from varying countries, offshore high-risk merchant accounts are enabled to process in multiple major currencies as well. Not only can you process payments in different foreign currencies, but you may also store your funds in multiple currencies. This will cut your expenses for currency conversions. That said, an offshore merchant account also has lower conversion fees.

Currency Conversion – this type of merchant account has a built-in feature that allows you to transfer foreign funds to your bank account in your local currency. This means that you wouldn’t need a third-party service to have your foreign incoming transactions converted to your local banknote.

Who needs an offshore merchant account?
Online-based businesses can best benefit from high-risk offshore merchant accounts. But which industries are highly in need of offshore accounts and why? For the most part, any trade that is prone to chargebacks is considered to be high-risk. Enterprises that are in the grey area may also find it difficult to get a local merchant account among these industries:

Adult Entertainment

Cryptocurrency

Online Gaming

Pharmaceutical

Telecommunications

Tobacco

Travel

Warranties

Take note that difficult offshore merchant account credit card processing is not only limited to these types of businesses and not all high-risk merchant account providers are capable of providing offshore accounts. Do your research and check for a capable high-risk offshore account to enjoy its advantages.

Advantages of a high-risk offshore merchant account
There are several advantages to an offshore account that you would definitely want to take advantage of. For one, you are most likely to pay a lower tax fee or even none at all.

Offshore accounts follow the tax laws of the country in which it is based. For example, you are a US-based merchant and you have an offshore account based in a city in Europe. You will then be paying tax fees following the tax laws of that particular city in Europe rather than the tax laws of the United States.

Another benefit of offshore high-risk merchant account is that you can maximize every bit of transaction that comes to your account. Offshore acquiring banks do not have a limit to the number of monthly transactions. This is a big game-changer for your business and all other international businesses.

Domestic accounts, on the other hand, have, unfortunately, a cap to the number of transactions or the amount that can be processed.
Lastly, as mentioned previously, you can accept any transaction in any currency – foreign or local. Again, this can help you boost your potential profit to its maximum capacity.

How to get an offshore merchant account?
When getting a merchant account for offshore transactions, you would want to consider owning an account in the country in which you will be making the majority of your transactions. Here are some of the things you might want to look out for when considering a processor for offshore accounts:

In what industries do they offer international merchant services?

Do they have support for POS systems?

Is their online platform compatible with all kinds of operating systems?

Are the rates reasonable? How will they charge you based on your business operations?

Do they have dedicated customer service and support or an account manager?

What are their contract terms? And what are their termination fees?

Does it come with a mobile application?

Is their mobile card-reader EMV compliant?

Do they charge lease for equipment needed to set up your merchant payments?

These are just a few of the questions that you initially have to think about when selecting your merchant account provider. Generally, the processing period getting an overseas merchant account can a week or more and you would need to present some or all the following documents for your application.

Copies of your valid identification

An old check or a bank reference letter of your business bank account

Banking history (if available)

Any proof of business

However, you must understand that an offshore merchant account should be your last resort when it becomes impossible for you to get a domestic account. Remember that when you need to settle a legal dispute with your offshore account, you will need to do it under the jurisdiction of the country where your offshore merchant account is based on.

Also, it is note-worthy to know that while providers can set you up with an account anywhere in the world, there are still some exceptions due to political considerations and instability of some countries.

While there may be a number of services that would claim to be the best, you need to weigh out every pros and cons to make sure that it is a good fit for your business.